Maastricht 25 years on – What happened to the European dream?

In the wake of the Brexit vote, one of the most searched for Google terms was apparently, “What is the EU?” A good place to start would be the Maastricht treaty, which is celebrating its 25th anniversary with a year-long programme of events in the Dutch city. Although there is little appetite for celebration in Brussels or Berlin.

Ask most people about Maastricht and they will respond with vague acknowledgement of its existence. The Dutch university city became the backdrop to this historic legislation. The treaty was signed in February 1992 and came into force on 1 November 1993. Yet the fundamental importance of this treaty cannot be overstated. Its ratification created the European Union and led to the introduction of the euro. Maastricht designed the architecture of the EU.

In the UK, the 48 per cent movement (named after the percentage which voted Remain) struggles to comprehend the backlash against the EU. For many of them (disparagingly lumped together as metropolitan elites), the EU represents the apotheosis of modern civilisation. They view the EU as the liberal dream enshrining workers’ rights, citizen protections and health and safety regulations. The latter of course became the hobby horse of the Daily Mail and assorted Eurosceptics.

The Remainers are confounded by the animosity of the Leavers. During the referendum campaign, this was encapsulated in a satirical lampoon video starring the actor Patrick Stewart. Entitled What has the European Convention on Human Rights ever done for us?, it pointed out that the answer included the right to a fair trial and freedom from torture.

Yet such Europhiles often confuse the EU with the original post-war European project, which was based on the concepts of peace, harmony and social justice. In the wake of World War II and the Holocaust, the European project set out to build a united continent. The aim was to ensure that such horrors would never again be repeated. The original Council of Europe was founded in 1949. Its most famous body is the European Court of Human Rights, which enforces the European Convention on Human Rights. It is also responsible for the social charter enshrining social rights.

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High hopes for Europe’s future were widely prevalent until recently. On the eve of the euro launch, Germany’s finance minister Oskar Lafontaine poetically spoke of “the vision of a united Europe, to be reached through the gradual convergence of living standards, the deepening of democracy, and the flowering of a truly European culture”.

We have been transported light years from this utopian vision. After several years of austerity, the eurozone crisis has escalated into a social catastrophe. The cost has been borne out in terms of jobs, wages, economic growth and blighted lives. Currently, there are almost 21 million unemployed people in the EU.

So where did it all go wrong?

Maastricht embodied the transition from a social democratic to a neoliberal model. The social democratic model focused on the general wellbeing of the population through full employment and redistributive principles of taxation and welfare. Whilst neoliberalism has seen unemployment shoot up, income and business taxes lowered and welfare cut. In line with the neoliberal model, Maastricht applied monetarist control of inflation. Maastricht also imposed limits on government public spending. This was dictated through limits on government debt and deficit as a proportion of gross domestic product (GDP).

It is no coincidence that John Major’s government ratified Maastricht and introduced the Private Finance Initiative (PFI). The two are intimately connected. Once public spending was curtailed, governments turned to the financial sector for private investment of infrastructure. One of the consequences is that instead of public revenues being reinvested, private profits are siphoned offshore.

PFI came about through intense lobbying of government by the City of London. It belongs to the category of public-private partnerships dreamt up by the City of London. In fact, public-private partnerships were always intended as a global export.

The result has been an enormous boon for the City especially the big banks. Yet the strain on public services is taking its toll. The UK PFI debt now stands at over £300bn for projects with an original capital cost of £55bn. To put this into perspective, the debt is around four times the size of the budget deficit used to justify austerity. This did not deter George Osborne from introducing the blockbuster sequel rebranded as PF2.

The Maastricht criteria were intended to facilitate the convergence towards the euro and beyond this to ever closer union. In order to qualify for the euro currency, both Greece and Italy turned to the likes of Goldman Sachs, JP Morgan and other banks. The banks advised them to mask debts using derivatives. In return, Greece effectively mortgaged its airports and highways in what The New York Times described as a “garage sale”. Touchingly, these instruments were named after Greek mythological figures. So Aeolos (the mythological god of wind) enabled Greece to hide debts in return for future landing fees at its airports. Whilst Ariadne “devoured” lottery revenues. As we all now know, the results were disastrous. Greece ended up on the hook for $300bn, much of it to banks.

Such logic is still playing out with the austerity crisis in Greece. The Troika of the EU commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) has effectively superseded national sovereignty. The Troika have bailed out Greece with funds whilst imposing austerity policies. This ensures that the economy is starved of investment and that growth stagnates. Thus, debt as a proportion of GDP, continues to increase requiring more bail-outs, which only exacerbates the problem.

What could possibly be the thinking behind this self-defeating logic? Well, for a start, the funds come with structural readjustment strings attached imposing a neoliberal agenda. Greek state assets are opened up to global capital and privatised. Whilst massive cuts erode public services, wages and pensions. Similar IMF programmes have been used in the global south for decades. UK austerity is also comparable to the prescriptions for structural adjustment applied to Greece. Based on such assumptions, it is questionable whether Britain would have been allowed to create the NHS and the welfare state due to the size of its post-war debts.

As far as the EU leadership is concerned, Greece needs to be made an example of – if Greece were to be let off the hook then Italy, Spain, Portugal and Ireland would all have followed. The austerity spiral is therefore perpetuated. All the while ordinary Greek citizens suffer with mass unemployment, skyrocketing poverty, collapsing public services and a health emergency.

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Not only has the periphery of Europe been plunged into social decline but there has been a curtailment of democratic accountability.

The Troika have routinely issued memoranda to be rubber-stamped by national parliaments in Portugal, Ireland, Cyprus and Greece. Even when Greece elected an anti-austerity government in Syriza, its mandate was ignored by global finance. Greece rejected the bail-out conditions in a referendum in 2015. In spite of all this, the Troika and the creditors forced Syriza to accept even harsher conditions. Philosopher Slavoj Zizek describes this direction of travel as “a Europe with Asian values”, which he qualifies as “the tendency of contemporary capitalism to suspend democracy”.

“Greece is not an exception. It is one of the main testing grounds for a new socio-economic model of potentially unlimited application: a depoliticised technocracy in which bankers and other experts are allowed to demolish democracy. By saving Greece from its so-called saviours, we also save Europe itself,” he wrote in 2012.

The negotiations for the EU-US trade deal, known as the Transatlantic Trade and Investment Partnership (TTIP), have become emblematic of the breakdown in the democratic process. The negotiations have taken place behind closed doors. TTIP aims to open up public services for trade liberalisation and harmonisation. In other words, public services will likely be opened up to corporate takeovers.

The Investor-State Dispute Settlement (ISDS) clause in particular has caused a furore. This would facilitate corporations to sue governments if their policies harm profits or even the future expectation of profits. Precedents from similar agreements have seen hundreds of foreign investors sue more than half of the world’s countries over policies taken in the public interest. In effect, ISDS acts as a deterrent against policies that harm the interests of corporations. Here in Britain, the NHS has particularly been the focus of activists. TTIP would effectively lock-in NHS privatisation.

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The EU-Canada trade agreement (Ceta) has just been signed. The direction of travel for 21st century Europe now appears to consist in global trade agreements and consolidation of EU hegemony. This will likely further override national sovereignty and empower corporations at the expense of ordinary people.

Pimco – one of the world’s largest investment funds – has warned of the backlash against globalisation elites. It recommends that populist measures need to be implemented to address inequality. What form would such measures take? Would they be protectionist with barriers to trade and migration or would they be social democratic with an emphasis on redistribution of wealth?

Brexit negotiations will presumably set the tone. Theresa May perplexingly states that “Brexit means Brexit”. Now the talk is of a smooth Brexit, which may translate into a balance being struck between access to the single market and limits on free movement. Yet will the EU be prepared to accommodate such a deal fearing that it would set a precedent for other countries? Or alternatively can the EU afford not to strike this kind of deal?

The question is whether the restoration of the European project of social justice can be achieved – a Europe that works for its citizens rather than in the interests of the elite. Time is running out. If the irresistible logic of neoliberal economics continues to pan out then the prospects are gloomy. It would most likely lead to the unravelling of the EU. In which case, Maastricht will not be celebrating many more anniversaries.

Youssef El-Gingihy is the author of ‘How to Dismantle the NHS in 10 Easy Steps’, published by Zero books